Did the Jews in the Dachau Gas Chambers Thank Government for Protection from Power Companies?

In my business class yesterday I mentioned my distaste for government regulation. A recent concern is the National Security Agency's use of personal information to retaliate against American dissidents.  The NSA's actions are like  the Soviet Union's 20th century economic retaliation against its dissidents.  In a recent Reason Magazine article and the video above, William Binney, a former NSA official turned whistle blower, describes retaliation for his revealing the NSA's misuse of personal information about US citizens.

A student raised this point: "It is difficult to choose between regulation that suppresses competition and the absence of regulation that allows large firms to take advantage of individual citizens."  The trouble is that there is little evidence that large firms took advantage of citizens when there was no regulation.  There is little evidence that the benefits of regulation, if any, exceed the costs. The growth of large firms coincided with the growth of regulation; regulation is a prerequisite to large scale, so advocates of regulation claim to solve a problem that they have caused.  Before federal intervention, cartelization of industry repeatedly failed.  It did not succeed until the Sherman Antitrust Act and Theodore Roosevelt encouraged it.  The Sherman Antitrust Act encouraged the growth of large-scale firms by illegalizing collusion or cooperation among small firms.

Moreover, the threat that large government poses to private citizens' welfare is worse than large firms' extraction of monopoly rents.  Is a United States government that has expanded through imperialism, murdered Native Americans, enabled the enslavement of Blacks through the US Constitution and the Fugitive Slave Act, murdered a million-and-a-half Vietnamese, exiled immigrants who disagreed with the capitalist system, and funded political correctness in universities to be trusted to make us safe from power companies?

Did the Jews gassed in Dachau feel grateful to the Nazi government for regulating power companies?

Stop Regulation of the Internet

Mike Marnell just forwarded this e-mail from Americans for Prosperity urging you to write your Congressman and Senators to oppose the Obama administration's attempt to regulate the Internet.  I wrote the following letter:

Dear Congressman Hinchey/Senator Schumer/Senator Gillibrand:

I oppose Julius Genachowski's and President Obama's efforts to squelch freedom of speech on the Internet.  The Internet does not need regulation, especially from a bonehead like Mr. Genachowski.  The very proposal is evidence of the authoritarian, fascistic intent of the Obama Administration and the Democratic Party.

Sincerely,

Mitchell Langbert


>Washington wants to take over everything it can get its hands on. The banks. Insurance companies. Automakers. Our health care.

Now Obama FCC Chairman Julius Genachowski has set his sights on taking over the Internet, and we're launching a major national effort to stop him.

Too many dominoes have already fallen. We need to hold the line. The Internet as is exists now is the most powerful tool for grassroots activism and communication that the world has ever known. We simply cannot risk allowing the FCC to succeed in its efforts to impose heavy-handed regulation by "reclassifying" the Internet as an old-fashioned public utility.

Today we are launching a major national effort to educate and mobilize Americans against this newest threat. Check out our new ad, which is running nationally starting today, on http://www.nointernettakeover.com/.

Robert McChesney, founder of the left-wing group Free Press (whose communications director was hired by FCC Chairman Genachowski to assist his effort to regulate the Internet) is honest about the stakes, telling SocialistProject.ca: "What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility."

Please take a moment right now to head over to http://www.nointernettakeover.com/ and view our new national TV ad called "Dominoes." If you like the ad, please consider clicking on the donate button. Your donation will help keep the ad on the air to educate and mobilize more Americans to demand that Congress step in and stop the FCC's Internet power grab.

The new site also has a petition that I hope you'll sign, and tools to write Congress and demand they stop the FCC. Chairman Genachowski and his two Democratic allies at the FCC could, with just their three votes, take over a sector of our economy roughly the same size as health care.

Congress cannot let that happen. As the legitimate legislative branch, Congress must step up and take responsibility. And we need to send a clear message that if this Congress will not stop the FCC's Internet takeover, we need to elect one that will.

With your help we can finally stop Washington's takeover streak.

Tim

P.S. Please forward this email to your friends and share our new www.NoInternetTakeover.com site on Facebook and Twitter. We need to make this a major issue so that Washington will understand that we're paying attention and will not accept another big government takeover. Thanks.

US Park Service: Legal Ramifications of Hudson Valley Park Unknowable

In response to the November 3rd Kingston Freeman article stating that Maurice Hinchey has proposed a bill to turn the Hudson Valley into a federal park, I have (a) contacted Congressman Hinchey's office for a copy of the bill and (b) inquired with the National Parks Service as to the legal implications of designating the Hudson Valley a national park.

In the Adirondack Park, a state park, construction of new septic tanks has been largely stopped and much residential construction is limited or illegal. New jobs rarely enter the Adirondack Park. If a citizen of Long Lake, Blue Mountain Lake or Speculator wants to start a business of any stature, they will have to move elsewhere. In the Town of Olive, New York City and State own about 70 percent of the land, so development is largely impossible. The city reservoir is located in Olive.

In the future, stricter regulations concerning wood burning, hunting and home sales are likely to ensue from various federal laws, specifically including the "cap and trade" proposal currently before Congress. Thus, law directly governing many ordinary citizens, specifically including those adhering to "alternative" lifestyles, farming, communal living and the like can easily become directly affected.

The following is an exchange I had with a representative of the US Park Service who says it is unknowable how much flexibility the Park Service will have in implementing regulation--or how responsive they will have to be to various external pressure groups. For example, Congressman Hinchey is a direct recipient of campaign contributions from numerous political action committees (PACs) in the agribusiness field. Might there be a tie-in between Hinchey's agribusiness interests and his focus on instituting park regulations?

Langbert: I live in the Catskills about 25 miles from Kingston, NY. In the November 3 issue of the Kingston Freeman, a local newspaper, there was an article that stated that Congressman Maurice Hinchey has proposed a bill to turn the Hudson Valley into a national park. I have a number of questions for you as the article was not descriptive the effects of this policy.

a. What regulations normally accompany the establishment of a federal park in a developed region? Here in New York we have the Catskill Park, in which I happen to live, and the Adirondack Park. There are regulations that apply in the Catskill and Adirondack Parks that do not apply elsewhere.

b. Do you have a model or a developed set of regulations for another park region that would be similar to the regulations that would be put into effect should the Hinchey bill pass?

c. What would be the effect of establishing a park on economic freedom in the following areas:

--building houses
--building septic tanks
--sale of real estate
--liens on property not deemed environmentally acceptable?

d. Would there be an effect on construction such as limitations on the amount of real estate development, and/or restrictions on how sewage systems are designed, and/or limits on size, drainage and other environmental effects of real estate construction?

e. Would there be effects on hunting, the introduction of wildlife, the use of firearms and/or on fishing.

Park Service: DEAR MR. LANGBERT: Thank you for your thoughtful inquiry regarding the proposed study of the suitability and feasibility of creating some form of national park system unit in the Hudson River Valley. I note that Congressman Hinchey's bill would require the NPS to examine approaches that would (1) encompass large areas of non-Federal lands within their designated boundaries, (2) foster public and private collaborative arrangements for achieving National Park Service objectives, and (3) protect and respect the rights of private land owners. I have referred your inquiry to others who have been working more closely on this particular issue, and they will respond as soon as possible to your specific questions.


Langbert: Are parks normally governed through regulation rather than law? In other words, what would you say is the ratio of regulation to law? I used to work with pension plans and the regulation/law ratio might have been 40-60 or something like that. What would you say it is in parks governance? Thanks, Mitchell.

Park Service: MR. LANGBERT: As of right now, there are 392 units in the National Park System. They range in size from less than an acre to several millions of acres. Each one has its own mission or purpose for existing, usually as defined by Congress. The parks are governed by a combination of laws, regulations, and policies that work in tandem, and I do not generally think
of them as applying in any particular ratio. The laws, regulations, and policies that would apply to a particular park will also vary, depending on the resources and values that characterize the park, and depending on any particular instructions that the law that established a park has imparted to us. I would invite you to visit the Office of Policy website at www.nps.gov/policy and browse through the wide range of laws, regulations, and policies that come into play. In particular, you might want to look at the Introduction and chapter 1 of NPS Management Policies 2006 (http://www.nps.gov/policy/mp/policies.html), which provide a pretty good context for understanding how we manage the National Park System

Langbert: Thank you very much for the information. I really appreciate it. If you hear anything else from your contacts please let me know. Thanks again.

Are Banks' Problems a Mortgage Meltdown? Or a Derivatives Meltdown? Two, Two, Two Excuses in One!

One thing I have learned after nine years in the corporate world, a few years consulting and 18 years teaching business in college is that it is difficult to understand someone else's business. In the recent discussion about a number of banks' financial problems I have heard that this was a "sub-prime crisis". The banks lent exhuberantly and to low income borrowers to whom they were pressured to lend, and the result was widespread defaults.

Today, the Belmont Club writes that the Washington Post now blames the banks' problems on derivatives trading. Which is it? Mortgages? Derivatives trading? I guess the banks, like the old Certs candy commercials, have two, two, two crises in one.

The Washington Post's familiar solution is of course regulation. But would regulators do a competent job? For regulation to work, the regulator must be smarter than the profit-maximizing investment banker. The question is whether reasonable, ethical, and profit maximizing bankers would have lost the money they have lost. If the answer is yes, then I'm not sure that regulators would have done much better. If the answer is no, then the problem is not regulation. Criminal, enforcement rather than better regulation is needed. Moreover, bankers already have a legal fiduciary duty to ensure the ongoing viability of their banks and to maximize profits. They obviously violated that "regulation". Why would a more esoteric form of regulation fare better? And why would government, which cannot even manage an election competently, be good at overseeing the esoteric world of credit swaps?

The pathology of Progressivism is that even where they do not understand the implications of their proposals, Progressives aggressively argue for them. The proposals inevitably involve expanding the state's powers, and the state then becomes the source of more severe problems than it solves. It is likely that the banks' current problems (and they are the banks' problems, not America's problems) are due to pressure from government, e.g., a form of regulation, to extend loans to low income borrowers who could not afford to repay the loans. Alternatively, and probably even more true, the problems are due to bad ethics on the bankers' part.

The article states:

"Derivatives did not trigger what has erupted into the biggest economic crisis since the Great Depression. But their proliferation, and the uncertainty about their real values, accelerated the recent collapses of the nation's venerable investment houses and magnified the panic that has since crippled the global financial system."

The authors note that AIG suffered a loss due to derivatives, but they do not seem to know how much of a loss, just that it was attributable to $440 billion in mortgage swaps. Was three percent in default? Twenty percent? If AIG does not know, then why was AIG in the business? And if the reporters don't know, why do they claim to know what the solution is to a problem that they do not understand? I would not trust a physician who does not know whether I had a stomach virus or a heart attack and prescribes me medication anyway.

Markets are capable of evaluating and punishing banks that engage in excessively risky behavior better than regulators are at assessing what risks banks ought to take. Markets are attempting to do that, but President Bush and Congress have decided not to let the markets work and to let AIG and other financial institutions fail. If banks fail, the government ought to protect depositors, but they ought not to support incompetent investment decisions and bad ethics.

The media is discussing this issue without providing facts, and then offering specific solutions that are not based on evidence. Perhaps the Washington Post should provide their reporters with packs of Certs, and leave it at that.

Media Deception About Inflation

About two years ago I veered from my focus on higher education into the subject of inflation. The reason is that, based on my recollection of the 1970s, when an inflation begins there is considerable media distortion about the reason. The cause of inflation is monetary. The reason for the media distortion is that inflation has two effects. One is to boost the stock market, the other is to boost consumer prices. The media has a vested interest in an increasing stock market, and so tends to lie about the reason. Inflation and the stock market are caused by monetary expansion.

Monetary expansion boosts the stock market for this reason. Interest is the price of money. The stock market computes future earnings with an implicit discount rate. By printing money, the Fed lowers the discount rate. Thus, when the Fed "reduces the interest rates" (prints money) it increases the stock market valuation.

Now, who benefits from the boost that monetary inflation gives to the stock market? The answer, of course, is corporate executives who hold stock options, Wall Street stock jobbers, asset holders in general, home owners and debtors. Who is harmed by inflation? People who work for a living, who are thrifty, who do not have debt and have to pay for necessities with the dollars that the Fed has devalued.

The largest debtors are big businesses. Media companies are corporate enterprises just like any other, and they hold debt. Therefore, their executives benefit from inflation. Therefore, there is considerable pressure on media outlets to lie about the reasons for inflation.

Not surprisingly, my concern about potential lying in the media have materialized recently in response to Congressional testimony by Michael Masters. First, on Fox Business News, there was a panel discussion that included much verbiage about how commodity speculators are causing inflation. Second, when I opened the New York Sun, Liz Peek's article "Time to Intervene in Commodities Markets" likewise omits the underlying monetary cause of price inflation. Price inflation is a monetary phenomenon, a fact that Fox as well as Peek omit. Instead, Peek, like Fox, attributes inflation to speculators. The media lying circus has begun.

Fox and the Sun are two of the few "Republican" sources, which is why I am loyal to them. It is a testimony to Wall Street's and corporate power that superstition is presented as news when the few "conservative" sources discuss inflation much like the New York Times.

As my good friend Howard S. Katz has put it, when reading about the economy, assume anything that the mass media says is the opposite of the truth. If the media says that high interest rates are hurting you, conclude that they are helping you. If the media says that there is a "sub-prime crisis", conclude that the bloated house prices that have been causing middle class bankruptcies for the past two decades are moderating. If the media says that inflation is caused by commodity speculation, assume that it is caused by monetary expansion. If the media says that a depression is near, assume that the stock market is about to go up.

Smart men have become rich in this way.

I have responded to Ms. Peek's and Fox's "news" pieces with the following letter:

>"Thanks for your article 'Time to Intervene in Commodities Markets'. I disagree with Mr. Masters's argument. Neither he nor anyone else is smart enough to know when to intervene in markets. The S&P 500 is up 1500% since January 1970. Is that a reason to cap stock prices? If not, then why is a 183% increase in commodity prices, 12.2% of the 38 year stock price increase, a reason to cap commodity prices? If pension funds wish to hold commodities as a hedge against inflation, should the federal government tell plan participants that they must suffer from inflation?

"Given that the global supply of dollars has increased by 8% a year for the past 2 1/2 decades and the Greenspan/Bernanke Fed have been on a money printing spree since 2000, why attribute rising commodity prices to speculation? Why not the money supply? Does Mr. Masters have a theory as to why printing money does not cause inflation? And is he a relative of Jimmy Carter?

"Perhaps a more useful story would be on the reason the M-3 monetary statistic is no longer published and what the growth in the quantity of M-3 has looked like since 1983. And might there be a connection between money supply and inflation? I mean, duh."

Community, Progressivism and the States

Woodrow Wilson advocated states' rights as part of his progressive philosphy. In his book Constitutional Government in the United States, first published in 1908 and still considered a classic in the political science field, Wilson argues for the importance of the states. The model of centralized federal authority was a product of the two Roosevelts, not of Wilson, despite his inadvertent contribution by creating both the income tax and the Federal Reserve Bank. Theodore Roosevelt, the most statist of all of our presidents, argued for integration of government and business. Franklin Roosevelt extended state power in numerous areas, most importantly by abolishing the gold standard.

Despite the twentieth century's centralization of power, Wilson understood the importance of local government to community. Excessive centralizaton overlooks the importance of community and so is anti-democratic. Since the primary thrust of the New Deal was such centralization, it was at odds with the progressive era's emphasis on democracy, or at least Wilson's version of it.

Wilson writes (pp. 50-1):

"Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contrbiution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have furnished us with an ideal means of integrating a vast and various population, adapting law to changing and temporary conditions, modulating development and permanently securing each item of progress. They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may in God's providence come to seek...Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consitute a veritable community. Are the United States a community? In some things yes, in most things no. How impossible it is to generalize about the United States."

Big business has likely pressed for centralization, and it is likely in the interest of big business to have consistent regulation and policy across the states. But big business has exited the nation. Manufacturing has moved to Asia and Mexico. The remaining large firms often do not pay high wages. Do the American people owe a favor to the firms that have not been interested in supporting them? Moreover, the problems that confronted big business in decades past have been modified, reduced and eliminated by technology. The coordination of separate regulatory, accounting and legal systems today is far from the problem that it was in the 1930s and 1940s. Integrated computer systems make compliance across diverse regulatory systems simple. Thus, large firms will suffer little from decentralization. Moreover, given the globalization of business and the eagerness with which firms have entered foreign countries with diverse regulatory systems, it is difficult to understand why adding more diversity will pose much of a problem to them, or given the eagerness with which firms have adjusted to diverse regulatory systems they can properly claim that they are an impediment here in the United States.

Abolish the Fed and Go on a Diet

The media continue to avoid the biggest story of the coming decade, the decline of the dollar. The economy is important to everyone, even more so than the Iraqi War. Unfortunately, the progressive movement of the early twentieth century, followed by the Roosevelt liberals of the 1930s and the postwar Keynesian consensus, have enfeebled public conversation about the money supply and about the economy. The macroeconomics taught in most universities is nonsensical but the public has been told that an understanding of it is necessary to participate in public conversation about the Federal Reserve Bank. This is not true. Fed policy is a political variable. But the result of all the obfuscation and pretension is enervated public participation and the facilitation of the financial community's excessive influence on monetary policy.

The result of the twentieth century's institutionalization of progressive propaganda is that banking, Wall Street and corporate lobbies have dominant influence over the country's monetary policy. The major news media are largely in synch with the financial lobby and echo the academic Keynesian propaganda which purposes to legitimize the Fed. The result is the absence of debate about a policy that grievously harms the public in the interest of "well ordered" credit markets and stock market price increases. Although comments that the stock market will almost always go up are common, no major observer has asked why (my friend Howard S. Katz is the sole exception, as far as I know). The reason is that monetary expansion or inflation reduces interest rates and so increases the value that investors place on future income streams (accountants and actuaries call this the present value of future earnings). This distortion of valuations of the future is a government subsidy similar to a welfare benefit. Few Americans believe in welfare but most have been duped into believing in this subsidy.

The absence of debate has crippled the nation's ability to formulate a coherent economic policy. Instead, backroom deals have been made with the public's money supply, and we are learning about them now, when it is too late. Sadly, the interests that are represented, such as Wall Street, are not overly ethical and have learned little from their experiences with Worldcom and Enron earlier in the decade. The Fed will hurt many Americans, much as it did in the 1970s. But the difference between a diet and inflation is that in a diet, the person who suffers pays for self-indulgence. In inflation, the investors, debtors and corporate interests who benefited from the monetary expansion are not the ones who will pay.

The policy that the financial lobby has devised is curious. Foreign investors have been convinced to hold dollars, keeping the value of the dollar much higher than it would be in a market that is not politically driven. In turn, there has been more consumption of gasoline, manufactured goods and other imports. No one knows the extent to which consumption has exceeded the nation's true market power, but it might be by a considerable amount. The result is that suburbs have been developed, large cars driven, obesity increased and jobs disappeared. Jobs have disappeared, contrary to the fundamental claim of Keynesian economics about the effects of inflation and monetary expansion, because the dollar is stronger than it should be so costs look higher here than in other countries. Americans, who were once a muscular, dynamic nation, have become a nation of fat slobs who do not work but rather stay at home watching television and weighing 400 pounds. (I include myself and have recently lost twenty pounds and have been working out four times per week. But that's only the beginning.)

A report that Lenny Rann sent me today that was written by a bearish financial analyst suggests that Wall Street and the commercial banks have acted dishonestly toward the foreign investors who have been bankrolling them and the general public. The last 25 years' increases in the stock market are largely due to these subsidies, so when news came out today that the Chinese are fed up with us and are intending to invest elsewhere, the Dow fell 360 points, better than two percent. Much like Americans' waist lines, the stock markets have flourished because of the something-for-nothing mindset that Wall Street capitalism has created.

America is no longer the nation of innovation; of Edison; of manufacturing; of new ideas; of hard work; of entrepreneurship. Rather, it is the country of investment banks; Jim Cramer's whining for lower interest rates; and selfish indifference to the effects of dishonest money.

America is going to have to go on a diet. Americans have been deceived by the Republicans as well as the Democrats. In past economic declines, the tendency has been to resort to interventionism. That is the likely result now. The problem is that the decline has been caused by intervention. The only way out is to become more athletic, to return to the kind of policies that made the US a leader. Those are policies that foster innovation, entrepreneurship and self-reliance. Regulation will kill American leadership, as will the Fed. This day is no longer far off. It is near. The Fed ought to be abolished and ought to be viewed as the source of all the pain that Americans will feel in the coming decades.

The Wages of Bureaucracy are Death

Friedrich von Hayek developed a systematic argument against government regulation and government edict. According to Hayek, regulators cannot anticipate consumers' shifting evaluations of goods and services and changes in small facts, knowledge of which is essential to effective management. As a result, a regulated system will lack flexibility, especially when the inflexibility is compounded over a large-scale socialist economy such as the Soviet Union's was. Moreover, innovation is not likely in a system where rewards cannot accrue to innovators because government rules and penalties deflect shifts in demand and distort consumers' valuations of innovation.

Merv of PrairiePundit blogs a tragic episode in the Iraqi War that is covered on Reuters.

According to Reuters, a federal regulation that the Democrats pushed through that emphasizes privacy rights of terrorists may have resulted in the deaths of US military personnel.

"U.S. authorities racing to find three kidnapped American soldiers in Iraq last May labored for nearly 10 hours to get legal authority for wiretaps to help in the hunt, an intelligence official told Congress on Thursday. In order to comply with the law, the government was required to spend valuable time obtaining an emergency authorization ... to engage in collection related to the kidnapping," Ronald Burgess, principle deputy director to McConnell, said in a letter to U.S. Rep. Silvestre Reyes...Some Democrats and civil liberties advocates say a temporary expansion of the eavesdropping authority passed in August threatens the rights of Americans and any permanent law needs more protections...The wiretap began at 7:38 p.m. (2138 GMT). Authorities then had 72 hours to obtain a special court's endorsement of the emergency authority, which was granted, a U.S. official said...

"An al Qaeda-led group in June said it had killed the three soldiers, and showed pictured of ID cards of two of the men..."

It is unknown if the information obtained in the wiretap would have enabled the military to stop the execution. Merv points out that the Democrats and ACLU who are pushing for the bureaucratic rules do not take responsibility for the murders of the three soldiers.

Paris on the Hudson

My following Op Ed appeared on page nine of the New York Sun of November 28 and is copied here courtesy of the New York Sun.

November 28, 2005 Edition > Section: Opinion > Printer-Friendly Version
Paris on the Hudson
BY MITCHELL LANGBERT
November 28, 2005
URL: http://www.nysun.com/article/23606
When considering the recent rioting in France, it is more important to remember that the rioters were poor than that they were Muslim - it was a case of economic, and not merely religious, strife. As such the episode should give New Yorkers pause. Just as the world witnessed a collision of two Frances, one of mostly ethnically French "insiders" and another of more diverse "outsiders," New York has increasingly become a city divided along class lines, with the lower stratum dominated by African Americans, Hispanics, and a perennially emigrating white working class. Is the lack of opportunity for the poor of both Paris and New York a coincidence?
Arguably not. Rather, it is in both cities a function of dirigisme, government intervention and control in the name of social cohesion and welfare. However wonderful it might sound in theory, in practice it is all too clear that "social cohesion" and "welfare" ends up excluding the poor.
In the post-World War II era, government played a large role in France's economic development. The emphasis was on creating a technocratic elite based on merit and a high degree of government influence on the economy. In the early 1980s, the socialist prime minister, Francois Mitterand, first aimed to intensify dirigisme, but because of the problems that nationalization created he reversed course and liberalized the economy. However, the liberalization did not do away with labor regulation. A 35-hour week was enforced and restrictions on firing that make hiring expensive were retained.
Like France, New York has a history of dirigisme. In the 1920s, Al Smith pushed for reforms that later became the basis for the New Deal. In reducing the influence of the patronage system of Tammany Hall, Fiorello La Guardia encouraged a meritocratic approach to hiring. The state's intervention in the economy intensified in the 1940s and 1950s with urban renewal and public housing laws that rebuilt the city's infrastructure. Due to this interventionist history, New York's economic philosophy today is closer to that of Paris than to that of Phoenix. New York's taxes are among the highest in the United States. Its rent control laws raise the rents for newcomers including the young and recent immigrants, creating homelessness. Just as French elites fear American culture, so the New York City Council passed a health insurance regulation in October targeting Wal-Mart and other big-box stores, cultural icons that are popular almost everywhere else in the country.
Regulation imposes costs on employers that make them less likely to hire. At 10%, French unemployment is higher than New York's, and among France's Islamic and African minorities unemployment levels are higher still. Tens of thousands of young people in France have given up looking for a job, and the unemployment rate for those under 25 is 25%.In New York, the unemployment rate is about 5.7% but, as in France, among teens it is 23% and for African Americans it is 10.6%. According to the Community Service Society, in New York in 2004 the black employment rate was 60.7% while for whites it was 76.6%.
In both Paris and New York, heavy regulation makes jobs scarce for those with the least power. In both cities a veneer of politically correct diversity rhetoric cloaks economic policies that benefit the median citizen such as middle class public employees while squeezing those at the margins, specifically marginal racial minorities.
Perversely, increasing labor costs through regulation creates incentives for employers to be more selective in hiring, which can mean indulging discriminatory preferences. Since regulation makes firing costly, it reduces employers' willingness to take risks on ambitious employees who lack conventional qualifications but may be willing to work longer and harder. For ambitious workers from underprivileged backgrounds, the way around discrimination often is competition through the acquisition of skills, but regulation limits the possibility of their acquiring skills by raising the cost to employers of hiring employees from diverse backgrounds that do not fit employers' stereotypes. Those who gain admission to the most prestigious schools and can afford the tuition, and those whose parents have trained them to be most articulate and socially adept, have an enhanced advantage under dirigisme. Those whose ability is harder to discern because it has not been as carefully cultivated and those who are most eager to work hard to succeed despite disadvantages are the ones likely to suffer most from marginalization.
In Paris the 35-hour workweek serves to reinforce the privileges of capital by preventing poor, would-be parvenus from working extra hours to compensate for their poverty. In New York, the state and city saddle employers with high taxes while the schools teach neither basic skills (reading, writing, and math) nor self-discipline. Instead, the students are taught to have self-esteem. The result is that the higher-end firms that can remain in New York are decreasingly likely to hire New Yorkers.
The French regularly denounce racism in the United States. Yet, when it comes to hiring, they are strikingly discriminatory. In New York, the diversity rhetoric is coupled with the eviction of Wal-Mart and the managed decay of the educational system, policies that cripple the poor while subsidizing special labor interests.
In both Paris and New York, large, established firms find it easy to comply with complicated regulations while small entrepreneurial firms find it difficult. Middle- to upper-income consumers don't mind spending more at a department store, while lower-income consumers are in need of the price reduction Wal-Mart offers. Most importantly, those who have not been able to graduate have a greater need for work experience in modest-paying jobs with longer hours and will benefit most from the experience that marginal jobs offer. But such jobs are driven out by dirigisme in Paris and New York.
Perhaps the biggest difference between France and New York is that dirigisme is a policy that influences all of France, while New York's state intervention does not cross the Hudson. Since the days of Horace Greeley, New Yorkers have tended to emigrate westward. In recent decades, the reason has been New York's war against the poor. The working-class youngsters in the French suburbs do not have a larger nation with a free market philosophy to which they can emigrate to escape the assault of dirigisme. As a result, the young French increasingly emigrate to London, much as New Yorkers have increasingly emigrated to Texas, California, and Colorado. Policies that claim to be communitarian are precisely those that are decimating communities in Paris and New York.
Mr. Langbert is an associate professor of business and economics at Brooklyn College.